Home insurance buyer's guide
It is safe to say that in most cases your home and all your contents within will form the
largest asset you have. Given that a great many of us have a mortgage on our home this may
also be seen as your largest debt as well. Naturally, as your home may be the largest investment
you make, the ability to protect this investment should be high on our priorities list.
Home insurance can be broken down into two main sections, buildings insurance
and contents insurance. Both will offer protection for their respective
covers against loss or damage, which can occur mainly in the form of theft (contents only), fire
damage or flood damage.
Whenever we suffer damage or theft of our possessions we can be left with a feeling of loss and
frustration, especially when you factor in the sentimental value some items may carry. However,
having insurance cover can considerably ease the distress caused.
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Not at all, in fact as you look at the different policies on offer from the many home insurance
companies you will be hard pressed to find two policies that are identical. While the idea of
buying buildings insurance cover or contents insurance
cover should be as easy as picking what you want off a shelf, you'll see that the differences
will range from certain levels of cover being excluded from some policies to different levels
of financial cover in others. As the covers will differ between insurance companies, you will
no doubt be able to find varying levels of cover.
Whilst the values and costs of policies will vary, the style of policies remains the same.
For instance 'new for old' policies for home contents insurance, also referred to as
'replacement as new' cover will meet the cost of replacing items should they have been
destroyed or stolen. Also, should items be damaged then the costs of repair will also be met.
Another type of policy is an 'indemnity' policy, also referred to as a
'wear and tear' policy. Indemnity policies pay to replace or repair your possessions,
but with an appropriate reduction for depreciation or 'wear and tear'.
In order to find the right home insurance policy cover for you, you will need to compare many
policies. However, with the Gocompare.com comparison service this daunting task should be made
far easier for you.
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Buildings insurance offers cover against problems with the structure of your home and permanent
fixtures and fittings such as fitted kitchens, baths and toilets. In many cases home insurance
policies will also offer insurance cover to include outbuildings such as greenhouses, sheds,
garages and accidental damage to underground pipes and cables, glass in doors and windows.
Boundary walls, gates, fences, drives, paths and swimming pools may not be covered. Though it
goes without saying that as different insurance companies offer different insurance policies
you should check the terms and conditions provided to make sure the cover meets your needs.
The type of cover you can expect from your buildings insurance would range from damage caused
by flood, fire or subsidence to damage caused as a result of theft, by storms, or malicious damage.
One thing to note is that Building Societies will probably make it a condition of the mortgage
that you have buildings insurance. You should be aware that you don’t have to take out any
buildings insurance policy they offer you, as they may offer limited cover and/or be very costly.
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Similar in principle to buildings cover, contents insurance should include just about everything
you would take with you if you moved. Furniture, household goods, kitchen equipment, frozen food
and drink, televisions, video, cd's, computer and audio equipment, personal items and valuables
up to policy limits.
Another cost which is surprisingly forgotten by many is the cost of clothes. Regardless of whether
it's a wardrobe full of t-shirts or Armani suits, the cost will soon add up.
Contents claims can arise from a number of sources such as burglary or a fire but a policy may
also cover you if your possessions are damaged or lost as a result of a burglary, an explosion,
water leaks or if your home is vandalised.
Many insurers cover the cost of replacing locks if your keys are stolen but you will have to
check if there is an excess to pay for this type of claim as the excess payable could negate
the cost of replacement. Most policies offer accidental damage but the extent of cover varies
between insurance companies. It may also be possible with some to add extra accidental damage
cover to the policy in the form of an ancillary for an added cost.
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The sum insured is the amount of money or value for which your home is insured. It is the
maximum value your home insurance company will pay regardless of the type of claim you may
have. You would be well advised to insure your home for an adequate amount to avoid claim
payments being reduced because of under insurance. Annual checks should be made to ensure
that your sum insured remains correct as invariably you will have bought new items such
as a replacement television or new carpeting which can change the value you should insure
for. It is your responsibility, not the home insurance company, to advise of the correct
sum to be insured.
You can calculate your own sum insured value by using the sum insured calculator supplied
by The Association of British Insurers (please refer to the
useful home insurance links
section to visit their site and read all supplied information about the calculator before use).
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When you take out a home insurance policy with an insurer all the information that they have has
been supplied by you. This means that the price that the insurance company has agreed for you
to pay for the policy has been based solely on good faith. You're unlikely to find an
insurance company coming out to your home to help you with the valuation of your contents and
assessing the condition of the building. While this may seem fairly obvious, the ramifications
of incorrectly advising the level or cover required can have very costly consequences.
Should you underinsure the value of your contents then more often than not the insurance company
will only cover you to the value of the agreed sum insured. The reason for this is the premium
they offered you had been calculated on the information you supplied in good faith. If the
information supplied was different, then it stands to reason that the calculation would have
been different and a different premium would have been offered. For instance, let's say
that 'Bob' has £15,000 worth of contents in his home but only insures it for half
that cost at £7,500, perhaps due to an innocent error or more dubiously, to lower the cost
of the insurance. Bob then suffers a burglary and has '3,000 worth of contents taken. The
insurance company will respect the amount originally supplied by Bob and look to pay out only
half the cost of the claim, '1,500, as he insured the contents in his home for half the value
to begin with.
It may seem a task to some to calculate the true cost of your contents but given the loss you
could stand to lose in the event of a claim it is well worth your while to get this figure as
accurate as possible. And remember, a new settee, satellite dish or widescreen television for
example, will alter the value you need to insure for.
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The greater the chance of a theft on your home, the greater the chance that a claim will be
raised and that a home insurance company will have to pay out to cover the claim. As home
insurance companies would prefer to pay out on less claims rather than more, and that nobody
wants to go through the ordeal of a burglary, the idea of having a secure home is a favourable
one. Recognising this, home insurers may offer discounts for adequately secured homes. Naturally
the definition of adequate may vary from one insurer to another but some examples they many look
for are:
- A professionally fitted and maintained burglar alarm system.
- Membership of an approved Neighbourhood Watch Scheme.
- Approved security locks on windows and doors.
Unfortunately, some householders are already in a high-risk area, for example many city
centres, and the insurers may insist that certain securities are in place before offering cover.
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An excess is the contribution you agree to pay towards any claim. Excess can be split into two
different types, Compulsory and Voluntary excess.
Compulsory excess
This is an amount of money preset by the insurer that you will pay towards any claim made on
your home insurance policy.
Voluntary excess
When you set up your home insurance you will be asked during the process if you wish to set
a voluntary excess level which can range from £50 to £1000. A voluntary excess is
the amount you agree to pay towards any claim with the distinction that this amount will be
chosen by you, rather than the insurance company. This would be in addition to the
compulsory excess.
Now it may seem odd to some that anyone would increase the amount of money that they pay
towards any claim, however an insurance company will recognise that you are prepared to pay
more towards a claim and subsequently lower the cost of the premium they offer. Of course,
it also goes without saying that you may not have to make a claim, but as you cannot guarantee
you won't, the choice is yours to make.
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Cover for items away from the home is not always included; in fact more often that not you
will need to apply for an additional cover if you wish to have peace of mind for any items
you take away from the home. This cover will generally be referred to as Personal Possessions
cover.
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